Centre agrees to pay Rs 6,320 cr as oil royalty to Assam

New Delhi: The Centre today agreed to pay Rs 6,320 crore to the Assam government as crude oil royalty as part of an out of the court settlement after eight years of protracted legal battle.

The amount will be paid by the central government to the Assam government over a period of three financial years commencing 2016-17.

Assam Chief Minister Sarbananda Sonowal thanked Prime Minister Narendra Modi, Finance Minister Arun Jaitley and Petroleum Minister Dharmendra Pradhan for the "proactive and bold steps" which led to the out of the court settlement.

"The Central and state governments were fighting in courts over the oil royalty issue since 2008 when both the governments were ruled by the Congress.

"But within nine months of the BJP government coming into power in Assam, we have resolved the dispute and the central government agreed to pay Rs 6,320 crore as oil royalty. We are thankful to the Modi government," Sonowal told here.

While in 2016-17, the central government will pay Rs 948 crore, in 2017-18 it will pay Rs 2,844 crore and in 2018-19 will pay Rs 2,528 crore. This is in addition to the Rs 1,450 crore already received.

The Oil India Limited produces 3.2 million tonnes crude oil in Assam annually, while Oil and Natural Gas Corporation Limited produces 1.1 million tonnes crude oil every year in the state.

The OIL and the ONGC have been paying royalty to the central and the state governments in terms of statutory provisions of oilfields (Regulations and Development) Act 1948 and Petroleum and Natural Gas Rules, 1959.

The Petroleum Ministry on October 30, 2003 had directed upstream companies, including ONGC, to give discount in price on sale of crude oil to the Oil Marketing Companies.

The notional price of the crude oil produced by upstream companies is initially derived on the basis of the average international price and then discounts are fixed as decided by the central government.